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ELLIOTT WAVE ANALYSIS - Latest Market Commentary

Stock Indices

Last week, we witnessed global stock market’s most volatile price action of the entire year! In the U.S., the VIX (the so called ‘fear gauge’) jumped 230% above its 200 day moving average, which is second highest on record and only behind the catastrophic 1987 crash. In Europe, Germany’s Dax index underwent its biggest one-day drop in history (by points) only to be recouped within the next several trading hours. In China, futures trading was halted to counter the bearish attitude that had already been looming since the June highs but had taken on a much more aggressive mode during the last week. Is it a coincidence that amidst such panic a report promptly flashed up on Monday stating that stock market timers with the best track records are treating the market’s ‘carnage’ as a buying opportunity? Still, the reaction of these market pros might be a bit too rash – although we have identified the current sell-off as part of a downswing that will precede a finalising advance into higher highs to verify our ‘inflation-pop’ idea, the current downswing will ###require some time to unfold. Under Elliott Wave Theory, counter-trend moves have to satisfy a combination of price and time requirements – a sell-off might be short in time but it should be deep in amplitude; a shallow decline should otherwise consume a considerable amount of time. Translated to the example of the S&P, the decline from the all-time high of 2134.72 was sharp but not deep – a fib. 38.2% retracement of the preceding 3rd wave upswing measures to the 1690.00+/- area which is the idealised target we focus on during the next months. The equivalent levels for the Dow Jones (DJIA) even extend to the fib. 50% retracement at the 14350.00+/- area whilst in Europe, the Eurostoxx 50 is seen with potential to min. 2600.00+/- and the Dax is expected to exceed its Oct.’14 low. In Asia, the Shanghai collapsed below its July low of 3373.54 and although the current strong rally during the latter half of the week might suggest a V-shaped bottom has occurred, the wave structure forewarns of a continuation lower. The same applies to the Nikkei 225 that is likely to trade below its 17714.30 low only to begin a more prolonged rally afterwards. Even the ASX 200 has taken big losses – its accelerative decline has verified the completion of a multi-year zig zag sequence from the 2009 low to this year’s high of 5996. But be aware that this zig zag is part of a double pattern that will continue higher from early-2016 onwards!

Financial Updates Currencies

Currencies (FX)

During the latter half of last week, the US$ index traded into the lower band of the forecast short-term resistance at 95.92+/-. The character of this rally however suggests that it is unfolding into an impulsive pattern – but how does this fit into the larger picture as we already confirmed the beginning of a new downtrend from the March high of 100.39? The most likely solution that is corroborated by fib-price-ratio measurements is that a running flat is underway unfolding as a 2nd wave counter-trend correction to the preceding April-May sell-off from 99.99 to 93.13. Although this allows for a brief spike higher, a reversal should be ###close at hand and the US$ index soon resume the larger downward tendency. The Euro’s price action can be interpreted in the same manner, and here we find an even more convincing fib-price-ratio as the ‘b’ wave of the running flat (in progress from the May high of 1.1468) almost pinpointed a fib. 38.2% extension of the ‘a’ wave. Strong support is expected towards 1.1097+/- to halt the current sell-off and initiate an upside reversal that would validate an acceleration higher in the weeks ahead. Sterling reacted at pre-determined short-term resistance at 1.5810 with a traded high of 1.5818 and has since sold off. Now it is approaching interim support towards 1.5325+/- to complete wave ‘a’ of the single zig zag decline in progress from 1.5818. It is important to emphasise that this single zig zag is the final part of a multi-month double-three sequence that (in this case) consists of a running flat followed by an ‘x’ wave and a single zig zag. As we expect Sterling to stretch lower during the next several trading sessions whilst the US$ index is on the verge of downside acceleration, we are aware of this short-term divergence – but this could resolve in a matter of days. US$/Yen staged a deep 4th wave rally during the last trading days and as it has already achieved a fib. 61.8% retracement, the probability points lower from current levels.

Financial Updates Bonds

Bonds (Interest Rates)

With the Federal Reserve maintaining its reserved stance on the possibility of raising interest rates in September (although Vice Chairman Stanley Fischer admitted that the likelihood for such a move was ‘pretty strong’ until China’s decision to devaluate the yuan), speculations abound on reasons for and against the first hike since the end of the Great Recession. Even readings of the most recent statements of the FED committee’s members are far from a unanimous interpretation. The more important will be ###Fischer’s speech on Saturday at Jackson Hole (Janet Yellen will not be present) – it could be a catalyst for short-term movements and help to gauge the conformity to the larger picture. From an Elliott Wave perspective however, the situation appears quite robust. Since forming a low at 1.903 this month, US10yr yields formed a V-shaped bottom and are poised for upside acceleration. This is because the August low has completed a multi-week double zig zag counter-trend decline that is labelled as a 2nd wave – 3rd wave acceleration is mandatory. This outlook is corroborated when we compare the T-Note futures that have confirmed the completion of a double zig zag upswing at the 129/28 high. In Germany, the DE10yr yield also successfully completed a 2nd wave counter-trend correction at 0.509% - an upside extension is due that would corroborate the 0.043% level reached in April as the historical low.

Commodities

Gold and silver prices were trading higher on Friday supported on some safe-haven buying amid weaker global stock markets before the weekend takes place. This week's financial market volatile action has led many economists to believe that the U.S. Federal Reserve will not be ready to raise interest rates in September and maybe even not at its December FOMC meeting, either. But a confusion comes from ###this week's better US economic figures (GDP +3.7% in IIQ, good jobs report), so high volatility remains the most likely scenario for the next few weeks. Gold and silver are expected to benefit from the possible turmoil in the nearest future - gold has already completed its long-term bear market and should lead precious metals to the upside whilst silver remains just a few percent away from its ideal downside targets. Meanwhile, Crude Oil was the biggest surprise to many market participants. The so advertised weak demand from China didn't take effect this week and Oil staged an impressive +20% recovery rally. It is enough to assume that the entire 4-year bear market has just completed into the recent low of 37.75!

LATEST ARTICLES

THE ‘INFLATION-POP’ - PRECIOUS METALS SET TO SURGE INTO RECORD HIGHS

Bloomberg hosted a Precious Metals Forum on 23rd May and WaveTrack International was invited to present our latest Elliott Wave price-forecasts. The event was sponsored by the CME Group and Johnson Matthey.

OUTLOOK & FORECASTS FOR 2013

Highlights:

  • The 2013 outlook for global stock indices and commodities remains very bullish and is entering the last stage of the ‘inflation-pop’ phase that originally began from the post-financial crisis lows of 2008/09
  • This is expected to ignite another period of asset buying that increases risk-on multiples by a minimum 45% per cent and in some cases as much as +300% per cent, sending some global stock indices and commodities into record highs
  • Shorter-term, there is a danger of a downward adjustment of -5-8% per cent, but then sharp price advances to resume
  • Commodity related stock indices and equities are expected to outperform as a sector during the next 12-16 months
  • Banking stocks to participate, but most will not exceed their pre-financial crisis highs

As always, this year’s Outlook & Forecasts for the next twelve months are created applying the Elliott Wave Principle for the assessment of pattern and price amplitude, also Cycle Analysis for the timing of the larger trend reversals. Not always do they jive, but they seldom contradict and more often, provide valuable insights into one or two variations of a similar theme within a seemingly unlimited amount of possibilities.

Even though this report outlines the price expectancy of all asset classes for 2012 it will also illustrate how this coming year fits together into the larger picture. The reasoning behind this is to move away from the 'black-box' stereotype and show you why the results relate to their specific outcome. Overall, this report deals with two different time-periods – long-term and inter-mediate term. Long-term refers to the uptrends from the Great Depression of 1932 onwards and inter-mediate term for the coming year and into 2013.

HOW TO INTERPRET EACH ELLIOTT WAVE CHART

What do you see when looking at an Elliott Wave chart? Just lots of numbers & letters overlaying the price data? – or do you see definable patterns that are immediately familiar? And how do you interpret the results of the analysis and put it into an effective trading plan? Read on and test your own knowledge of these subjects and much more...

A COMMODITY SUPER-CYCLE?

Recent reports of a Commodity Super-Cycle grabbed my attention for two reasons – first, this is diametrically different to the outlook I foresee developing during the next decade, and second, this terminology has surfaced at a time when various commodities have already undergone large percentage gains measured from the Feb.'09 lows

THE 'DEFLATIONARY SCENARIO'

The primary theme of this presentation focuses on a 'Deflationary' outlook, forecast as the dominant aspect continuing during the next decade. This is derived from analysing the Elliott Wave pattern structure of the CRB (Cash) Index during its expansionary period of the last 76 years.

THE 'FLASH CRASH'

The Update Alert! messaging service of EW-Forecast Plus responded to the sharp collapse and the following recovery of US stock indices during the volatile trading session on the 6th May.

OUTLOOK FORECASTS FOR 2011

This analysis centres around the S&P 500 that is used as a proxy for other global indices. The great bull market beginning from the 1932 low ends 68 years later in 2000 - other global indices peaked later in 2007 (75yrs) – some still continuing to progress.

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TESTIMONIALS

"I just wanted to congratulate you on the EW-Compass reports launch. I'd say all the work you've all put into this project is well worth it… never cease to be amazed by the harmony that you find between the fib relations you highlight and the Elliott count you propose. You are a true descendant of RNE, and I'm quite sure he'd have really loved to see your work… Another aspect that sets you apart is your deep knowledge of the how and why of pattern relationships between higher & lower degrees of the same price action. So much to learn there". - T.S.

ELLIOTT WAVE PATTERN

INTRODUCTION TO THE WAVE PRINCIPLE

The Wave Principle, often referred to as Elliott Wave is a unique methodology that applies Natures Laws, those encompassing the Natural Sciences and Universal Geometric Philosophies to the financial markets. It allows us to view price fluctuations as an organised process that can be non-linearly extrapolated to gain a glimpse into the future direction of trends, counter-trends and amplitudes on any market or contract traded around the world.

Expanding Diagonal Patterns - Do they actually exist? - Elliott's inclusion of the Contracting Diagonal

In R.N.Elliott's original treatise of "The Wave Principle (1938)", he introduces us to diagonal patterns for the first time on page 21. Under the heading, Triangles, Elliott describes the difference between horizontal triangles that represent hesitation within an ongoing, progressive trend and diagonal triangles that form the concluding 5th wave of a larger five wave sequence.

NEWS & EVENTS

Tradersworld Online Expo #12 – Starts 12th November 2012

Peter Goodburn will be presenting his latest Elliott Wave analysis at the 12th Trader Expo held online for 7 weeks starting on 12th November 2012 and ending in the new year on 6th January 2013. Peter’s presentation is entitled “Elliott Wave Price Forecasts & Cycle Projections – Three Phases of the 18 Year Bear Market ~ ‘Shock–Pop–Drop’” for more information visit http://tradersworldonlineexpo.com/

Announcement: 123rd Battery Council & Trade Fair Convention in Miami, 1-4 May 2011

Peter Goodburn will be presenting his latest Elliott Wave analysis at the 123rd Trade Fair Convention of the Battery Council in Miami, 1-4 May 2011. Peter’s presentation is entitled "The Historical Price Trend of Lead and Applying the Elliott Wave Principle to plot its course into the Future".

ELLIOTT WAVE PRICE-FORECAST UPDATES